Category Archives: Uncategorized

Below is a smattering of telecommunications stories from the past two weeks. Some are trendy, some are interesting, and some are just weird. This is by no means an exhaustive account of the past two weeks in telecommunications. It is simply what I personally found interesting from the wide array of telecommunications news.

Disclaimer – The views expressed in this summary are my own and not necessarily those of Bradley Berkland Hagen & Herbst, LLC.

I. Universal Service

Federal Communications Commission (“FCC”) Wireline Competition Bureau (“WCB”) Announces Funding Year 2018 E-Rate Cap – On February 20, 2018, the FCC WCB released a Public Notice regarding the E-Rate funding cap for Funding Year 2018. According to the Public Notice, the funding cap is set at $4,062,030,726 and represents a 1.8% inflation-adjusted increase from the Funding Year 2017 cap. The FCC’s Public Notice can be accessed at Public Notice (DA 18-163).

II. Open Internet/Net Neutrality

Chairman Pai Responds to Congressional Request to Delay Vote on Restoring Internet Freedom Order – On February 8 and 9, 2018, respectively, Chairman Pai sent response letters to Representative Colleen Hanabusa (D-Hawaii) and Senator Richard Blumenthal (D-Conn.), et al., explaining the reasons he did not delay the December 14, 2017 vote on the Restoring Internet Freedom Order (“Order”). Despite claims that the proceeding was marred by fraudulent comments, Chairman Pai maintained that the Order amply addressed the rulemaking record, and the draft Order was released over three weeks prior to the vote, allowing the public ample opportunity to review and submit feedback. The letter to Representative Hanabusa can be accessed at Hanabusa Letter and the letter to Senator Blumenthal, et al., can be accessed at Blumenthal Letter.

Restoring Internet Freedom Order Published in Federal Register – On February 22, 2018, the FCC published in the Federal Register the Restoring Internet Freedom Declaratory Ruling, Report and Order, and Order (“Order”). The Order is effective April 23, 2018, with the exception of amendatory instructions 2,3,5,6, and 8. The delayed items will become effective only after the FCC publishes a subsequent Federal Register announcement providing their applicable effective date(s). The FCC said in the February 22, 2018 Federal Register announcement that the Order “will also be effective upon the date announced in that same document.” The Federal Register announcement can be accessed at Federal Register Announcement.

Commissioners Clyburn and Rosenworcel Release Statements on Publication of Net Neutrality Repeal Order – On February 22, 2018, Commissioners Clyburn and Rosenworcel issued statements on the publication of what they called the “Net Neutrality Repeal Order.” Commissioner Clyburn decried the repeal of net neutrality stating “[t]oday it is official: the FCC majority has taken the next step in handing the keys to the internet over to billion-dollar broadband providers by publishing the Destroying Internet Freedom Order in the Federal Register.” However, Commissioner Clyburn also expressed optimism that, ultimately, “robust net neutrality protections will prevail with the American public!” Commissioner Rosenworcel described the repeal of net neutrality as “a study in just what’s wrong with Washington.” Commissioner Rosenworcel asserted that in repealing net neutrality, the FCC “turned a blind eye to all kinds of corruption in our public record—from Russian intervention to fake comments to stolen identities in our files” and stated that “[a]s a result of the mess the agency created, broadband providers will now have the power to block websites, throttle services, and censor online content.” Commissioner Clyburn’s statement can be accessed at Clyburn Statement and Commissioner Rosenworcel’s statement can be accessed at Rosenworcel Statement.

Petitions for Review of Restoring Internet Freedom Order Filed Shortly After Order’s Publication in the Federal Register – At least three entities recently filed petitions for review of the Restoring Internet Freedom Order (“Order”). The National Hispanic Media Coalition, NTCH, Inc., and the Benton Foundation filed their petitions in the D.C. Circuit on February 23, 26, and 27, 2018, respectively. The petitions seek review on the basis that the Order is arbitrary and capricious, an abuse of discretion, not supported by substantial evidence, and otherwise contrary to law. The petitions ask the Court to hold unlawful, vacate, enjoin, and set aside those portions of the Order reclassifying broadband Internet access service as an information service not subject to the protections of Title II of the Communications Act. The applicable Case Nos. are: (1) National Hispanic Media Coalition – Case No. 18-1056; (2) NTCH, Inc. – Case No. 18-1061; and (3) the Benton Foundation – Case No. 18-1062.

III. Emerging Communications Technologies

FCC Issues Notice of Public Rulemaking on Emerging Communications Technologies – On February 22, 2018, the FCC approved a Notice of Public Rulemaking (NPRM) that seeks to flesh out the FCC’s authority under Section 7 of the Communications Act (“Act”) to assess emerging communications technologies. Section 7 of the Act was passed by Congress in 1983 and requires timely action by the FCC to encourage the provision of new technologies and services to the public. Specifically, Section 7 of the Act requires the FCC to respond within one year to applications proposing new technologies or services. “The NPRM proposes rules for Commission evaluation of petitions or applications proposing new technologies and service. In addition, the NPRM seeks comment on how the Commission can comply with the statutory requirements of [S]ection 7 of the Act for Commission-initiated proceedings for new technologies or services.” The Press Release regarding the NPRM can be accessed at Emerging Communications Technologies Press Release and the full text of the NPRM can be accessed at Emerging Communications Technologies NPRM.

IV. In the Press

Law360 – Law360 published an article on February 20, 2018 discussing the DOJ’s vehement arguments against AT&T’s request for evidence of Donald Trump’s rants against CNN in the DOJ’s lawsuit opposing AT&T’s proposed purchase of CNN parent, Time Warner.

On February 23, 2018, Law360 published an article describing how FCC Chairman Pai was awarded a “token firearm” by the National Rifle Association (“NRA”) for alleged threats and insults made against him because of the recent net neutrality deregulation. According to the article, other recipients of the “courage under fire” award include Mike Pence, Rush Limbaugh, and former Milwaukee sheriff David Clarke.

You must have a subscription to Law360 to view and read these articles. Subscription information can be found at Law360 Telecom Website.

Below is a smattering of telecommunications stories from this past week. Some are trendy, some are interesting, and some are just weird. This is by no means an exhaustive account of the past week in telecommunications. It is simply what I personally found interesting from the wide array of telecommunications news.

Disclaimer – The views expressed in this summary are my own and not necessarily those of Bradley, Berkland, Hagen & Herbst, LLC.

I. Universal Service

Federal Communications Commission (“FCC”) Wireline Competition Bureau (“WCB”) Releases FCC Forms 499 and Accompanying Instructions – The FCC WCB has released the FCC Forms 499-A, FCC Forms 499-Q, and accompanying instructions. The FCC Form 499-A and accompanying instructions are to be used in April 2018 to report calendar year 2017 revenues. The FCC Forms 499-Q and accompanying instructions are to be used in calendar year 2018 to report quarterly projected and collected revenues. According to the Public Notice, the revisions to the FCC Forms 499 are limited to date changes, a circularity factor update, and other non-substantive form revisions. The Public Notice can be accessed at FCC Form 499 Public Notice and the official revised FCC Forms 499 and accompanying instructions will be made available shortly on the Universal Service Administrative Company’s (“USAC”) website at USAC Forms – Contributors.

Commissioner Clyburn Talks Federal Universal Service Fund (“USF” or “Fund”) Contributions – In her February 14, 2018, comments at the Winter Summit, Commissioner Clyburn expressed concerns about the sustainability of the federal USF absent changes to the method of assessing contributions. Acknowledging that contribution reform “has languished for far too long,” Commissioner Clyburn advocated for the following contributions assessment system: “the infrastructure that is supported by the Fund, should be the infrastructure that is assessed by the Fund.” Responding to objections that broadband connections should not be included in the USF contributions assessment methodology, Commissioner Clyburn asserted that the Internet Tax Freedom Act does not bar assessing contributions on broadband and a hybrid connections/revenue approach would not only significantly reduce consumers’ per-connection fees, it would also significantly reduce the contribution factor. Should contribution reform by the Joint Board fail, Commissioner Clyburn advocated for a pitch competition that would invite new, outside experts to consider and present their ideas for contributions reform. The only caveat, according to Commissioner Clyburn, is that the “pitches must be ideas[] that have not been hashed, rehashed, or rehashed again in the contributions docket.” Commissioner Clyburn’s comments also addressed the High Cost and Lifeline programs. A full transcript of Commissioner Clyburn’s remarks can be accessed at Clyburn Remarks.

II. Open Internet/Net Neutrality

House Democrats Send Letter to Federal Communications Commission (“Commission”) Chairman, Ajit Pai Asking for Information About How the Commission Analyzed Public Comments Filed In the Restoring Internet Freedom Proceeding – In a February 13, 2018 letter, twenty-four (24) Democratic members of the House Energy and Commerce Committee asked Chairman Ajit Pai to answer a series of questions about how the Commission analyzed public comments in the Restoring Internet Freedom Proceeding. The inquiries primarily seek information regarding any guidelines and/or internal legal analyses provided to staff working on the proceeding, the treatment of consumer comments filed in the proceeding, data to support the Chairman’s statement that comments filed from Russian email addresses were in favor of net neutrality, reasons for the FCC’s refusal to cooperate with New York Attorney General Eric Schneiderman’s criminal investigation, any verification or procedural devices used to confirm the identities of persons who allegedly filed comments in the proceeding, how the Commission decided which arguments filed by members of Congress should be considered in the proceeding, what analysis the Commission used to determine that consumer complaints about net neutrality violations were not relevant to the Commission’s net neutrality decision, why the Commission did not remove fraudulent comments from the public website, the scope of comment review and resources devoted to that review, and whether any training sessions were held for staff tasked with record review. The letter asks Chairman Pai to respond to these questions no later than March 6, 2018. The full contents of the letter can be viewed at Letter to Pai Concerning Net Neutrality Comments.

Multiple Entities File Motions Seeking to Intervene in Restoring Internet Freedom Appeal – On February 14, 2018, AT&T, the American Cable Association (“ACA”), the Internet & Television Association (“NCTA”), USTelecom, and CTIA (collectively “Entities”) filed motions with the D.C. Circuit, First Circuit, and Ninth Circuit Courts to intervene in the Restoring Internet Freedom Appeal. According to the Entities, they filed the motions to intervene to preserve their right to participate in judicial review, if the Federal Communications Commission’s motions to dismiss petitions seeking review of the Restoring Internet Freedom Order are not granted. The Case Nos. for each Circuit are as follows: (1) D.C. Circuit – Case No. 18-1011; (2) First Circuit – Case No. 18-1053; and (3) Ninth Circuit – Case No. 18-70133.

Federal Communications Commission (“Commission”) Files Motions to Dismiss Petitions for Review of Restoring Internet Freedom Order – On February 9, 2018, the Commission filed motions with the D.C. Circuit, First Circuit, and Ninth Circuit to dismiss Petitions for Review (“Petitions”) filed by New America Foundation’s Open Technology Institute. The Commission argued that the Petitions are premature because neither a summary of the Restoring Internet Freedom Order, nor the text of the amended rules have yet been published in the Federal Register. The Case Nos. for each Circuit are as follows: (1) D.C. Circuit – Case No. 18-1011; (2) First Circuit – Case No. 18-1053; and (3) Ninth Circuit – Case No. 18-70133.

III. Telephone Consumer Protection Act (TCPA)

A Pattern of Egregious Behavior and Procedural Defects Undercut Petition to Reconsider $1.84 Million Fine – On February 15, 2018, the Federal Communications Commission (“Commission”) rejected a Petition to Reconsider (“Petition”) filed by Scott Malcom and his companies DSM Supply, LLC and Somaticare, LLC (collectively “Companies”). The Companies sought reconsideration of a $1.84 million fine issued by the Commission in February 2016 for the illegal transmission of unsolicited facsimile advertisements (“junk faxes”). Rejecting the Petition on procedural grounds, the Commission noted that: (1) the Petition relied on facts and arguments previously raised by the Companies and rejected by the Commission; and (2) with respect to the Companies’ argument that the fine violated the Excessive Fines Clause of the Eighth Amendment, the time to raise that argument was in 2014, in response to the Commission-issued Notice of Apparent Liability (“NAL”). Specifically, regarding the Companies’ actual ability to pay, the Commission found that the Companies’ Petition relied on financial information that could have been presented in response to the NAL and the Companies had not disputed their ability to pay when responding to the NAL. The Commission further found that the public interest did not justify a reconsideration of the fine because, the Companies’ “TCPA violations were numerous, egregious, and occurred after [the Companies were] issued a citation advising [them] that [they] were violating the law.” Although the Commission dismissed the Companies’ Petition on procedural grounds, it also rejected the Companies’ Eighth Amendment argument on the merits. Specifically, the Commission found that the Companies did not meet their burden to show that the forfeiture imposed was unconstitutionally excessive given the maximum statutory forfeiture amounts and the gravity of the Companies’ underlying offenses. Note that, according to the Order on Reconsideration, the Companies filed their response to the NAL nearly seven (7) months after the filing deadline, engaged in rude and dismissive behavior when responding to complaining consumers, and the Commission received over 350 consumer complaints after the Companies received their first warning that their conduct was in violation of the law. Click on the following links to view the Press Release and the Order On Reconsideration.

IV. Broadband

Trump Releases American Infrastructure Initiative and Fiscal Year 2019 Budget – According to Trump’s American Infrastructure Plan released on February 12, 2018, “$50 billion of the $200 billion in direct Federal funding will be devoted to a new Rural Infrastructure Program to rebuild and modernize infrastructure in rural America.” The plan will also allocate $20 billion to expanding infrastructure financing programs, including rural utility lending. Additional details on Trump’s rural infrastructure goals can be found in the Trump American Infrastructure Initiative and the Trump Fiscal Year 2019 Budget.

Trump Discusses Rural Broadband at Infrastructure Proposal Meeting – The White House released remarks made by Trump on February 14, 2018 about Rural Broadband Infrastructure during a meeting of bipartisan members of Congress. The remarks contain the following information regarding rural broadband infrastructure:

Trump has laid out principles for an infrastructure initiative;

The infrastructure initiative seeks to implement a faster permitting process of two years, as opposed to ten years, with a goal of one year, if possible;

$50 billion will be spent on rural infrastructure and Internet access.

Law360 – Law360 published two articles this week discussing the involvement of Federal Communications Commission (“FCC”) and Department of Justice (“DOJ”) officials in ongoing investigations or trials. In one article, Law360 states that the FCC Office of Inspector General is investigating Chairman Ajit Pai over allegations that he improperly pushed for rule changes relaxing media ownership rules for the benefit of Sinclair Broadcasting Group. In the second article, Law360 states that AT&T Inc. is seeking to have Makan Delrahim, head of the U.S. Department of Justice’s Antitrust Division, testify in the case challenging AT&T’s planned purchase of Time Warner Inc. According to Law360, there has long been speculation about what motivated the DOJ’s November decision to sue over the $85.4 billion mega-merger, with some attributing the action to undue influence by Trump. You must have a subscription to Law360 to view and read these articles. Subscription information can be found at Law360 Telecom Website.

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[1] I recently lost my dear friend and work colleague, Leslie Herbst-Saporito. Leslie always wanted us to do a weekly telecom write-up. Sadly, we did not accomplish that goal prior to her passing. Leslie would have supported the idea of generating this summary. Leslie, you are with me every day in this practice. I will miss you always.

With all the recent hoopla surrounding broadband Internet privacy regulation and the potential rollback of the Net Neutrality Order, contributors may have overlooked new mixed-use special access/private line benefits and obligations created for them by the FCC.

Confirming the Old

On March 30, 2017, the Federal Communications Commission’s (“FCC” or “Commission”) Wireline Competition Bureau (“WCB”) released an order, the Intrastate Request for Review Order (“Order”),[1] denying several pending requests for review contesting Universal Service Administrative Company (“USAC”) audit findings related to intrastate mixed-use special access/private lines and the “ten percent rule.”[2]

Generally speaking, the Order was unremarkable, confirming that USAC appropriately relied on the ten percent rule to determine the jurisdictional nature of mixed-use special access/private line revenues[3] and affirming the FCC’s past decisions that it is the nature of the traffic carried on a private line that determines whether the line should be classified as intrastate or interstate.[4]

Creating the New

The Order did diverge from historical FCC precedent, however, in two particular ways:

Most importantly, the Order created an affirmative obligation for telecommunications providers, requiring them to “provide basic guidance to their customers [who provide intrastate certifications or statements] regarding what constitutes intrastate or interstate traffic.”[5] Specifically, the Order held that “[c]arriers should specifically make customers aware that it is the nature of the traffic over the private line that determines it jurisdictional assignment, not merely the physical endpoints of the facility over which service is delivered.”[6]

How this will play out in an audit context, and whether telecommunications providers can truly be required by the FCC to take on an affirmative obligation to educate their customers on federal Universal Service intrastate mixed-use special access/private line revenue requirements, remains to be seen. Given that USAC does not have the authority to make policy, interpret unclear provisions of the statute or rules, or interpret the intent of Congress,[7] however, it tends to read the FCC’s orders very literally. Therefore, at a minimum, the safest course of action for telecommunications providers at this time is to add the language from the Order to their customer intrastate certifications and/or statements and ensure that a good faith effort to understand the jurisdictional nature of the traffic over their customers’ mixed-use special access/private lines is undertaken.

The Order held that whether a certification has been completed is irrelevant if a telecommunications provider can prove that the traffic carried on the private line is less than ten percent interstate.[8] Pursuant to the Order, acceptable forms of proof of intrastate jurisdiction that telecommunications providers can obtain include:

A tariff demonstrating that the revenues associated with the service purchased pursuant to that tariff are properly assigned to the jurisdiction in which the tariff was published.[9]

Customer statements or acknowledgements regarding the jurisdictional nature of a customer’s traffic. Per the Order, “[t]hese statements need only indicate whether, to the customer’s understanding, more than ten percent of the traffic on its private line is interstate or, alternatively, ten percent or less of the traffic is interstate.[10]

In those instances where a private line is technically unsuitable for interstate use, a sworn declaration from a corporate officer.[11] The FCC WCB states that such a declaration should be “based on the carrier’s precise knowledge of the network design and the customer’s stated or planned usage of the network” and would be “supported with engineering reports or other documents regarding the technical specifications for the service.”[12] Acknowledging that it may be difficult to meet this standard, the Order concludes that “it may be easier for the carrier to collect a certification or equivalent statement from the customer regarding the nature of the traffic.”[13]

Any other documentation or evidence of the jurisdictional nature of a private line that USAC finds reasonable in its role and judgment as an auditor.[14]

Note that the Order does not shift the burden of proof to USAC with respect to determining the jurisdictional nature of a mixed-use special access/private line. Telecommunications providers and their customers must make a good faith effort to assign a mixed-use special access/private lines to their appropriate interstate or intrastate jurisdiction.[15]

Timing

Given that the FCC views the Order as affirmative in nature, telecommunications providers should immediately account for the benefits and obligations created by the Order, if they have not already done so. Any information and/or documentation obtained from a customer to demonstrate the nature of traffic on a mixed-use special access/private line should be retained for a minimum of five years from the date of the applicable contribution.[16] So should any information/documentation created to educate a customer regarding the jurisdictional assignment of traffic over the mixed-use special access/private line.[17]

Complying with the FCC’s federal Universal Service intrastate mixed-use special access/private line requirements can be challenging and lack of proper information/documentation is a common finding in USAC federal Universal Service audits. If you have questions regarding the FCC’s rules surrounding the treatment of mixed-use special access/private lines, we encourage you to reach out to Kristin Berkland, of Bradley Berkland Hagen & Herbst, LLC for more information. Kristin can be reached at kristin@bradleylawmn.com or (651) 379-0900 ext. 106.

Disclaimer

This blog post is a publication of Bradley Berkland Hagen & Herbst, LLC. The purpose of this blog post is to inform our clients, colleagues, and friends of recent federal universal service legal developments. This blog post is not intended to be, nor should it be used as, a substitute for specific legal advice as Bradley Berkland Hagen & Herbst, LLC only provides legal counsel to its clients, and only in response to specific factual inquiries regarding situations.

[3]Id. at paras. 3, 8-11 (“Mixed-use special access lines are assignable to the interstate jurisdiction if the interstate traffic constitutes more than ten percent of the total traffic and to the intrastate jurisdiction if it constitutes ten percent or less.”) (citing 47 C.F.R. § 36.154(a); and MTS and WATS Market Structure, Amendment of Part 36 of the Communications Rules and Establishment of a Joint Board, CC Docket Nos. 78-72 and 80-286, Decision and Order, 4 FCC Rcd 5660, 5660-61, para. 1 & Appendix (1989)).

A well intentioned federal universal service contributor files a revised FCC Form 499-A just prior to, or on, the March 31st one-year revision deadline thinking that he/she will receive a downward adjustment of the form. For some reason, the filer accidentally reports non-assessable revenue on an assessable line of the form. Approximately four months later, the filer receives a true-up invoice from the Universal Service Administrative Company (“USAC”), but instead of finding a federal universal service fund credit on the invoice the filer finds a substantial additional federal universal service assessment. The filer now may have good reason consider an FCC waiver request. The FCC’s recently issued ATS Financial Hardship Order, available at https://prodnet.www.neca.org/publicationsdocs/wwpdf/da161089.pdf, specifies the circumstances under which such an error constitutes sufficient financial hardship such that the filer may seek a waiver of the one-year downward revision deadline.

With very limited exceptions, federal universal service contributors are required to file FCC Forms 499-A by April 1 of each year reporting their prior calendar year’s revenues. A filer that discovers an error in the revenue reported on its FCC Form 499-A is required to correct that error by filing a revised form. The FCC requires revisions that result in additional federal universal service contributions upon discovery of a revenue reporting error. Ever since the Commission issued its One-Year Downward Revision Deadline Order, available at http://www.universalservice.org/_res/documents/about/pdf/fcc-orders/2004-fcc-orders/DA-04-3669.pdf, however, revisions that result in a reduction in federal universal service contributions must be filed by March 31 of the year after the original filing due date or the filer risks foregoing return of the amounts it overpaid to the federal universal service fund.

Such was the case for American Teleconferencing Services, Ltd. (“ATS”), a filer who determined upon receiving its true-up invoice from USAC, that it had inadvertently reported non-assessable foreign-to-foreign revenue on an assessable line of its revised 2012 FCC Form 499-A. As a result, instead of receiving its anticipated refund, ATS was invoiced for additional federal universal service contributions. Although ATS attempted to file a second revised 2012 FCC Form 499-A, USAC rejected the second revision as untimely because it was filed outside of the one-year downward revision deadline. The FCC Wireline Competition Bureau sided with USAC, denying ATS’s waiver request of the one-year downward revision deadline.

Enter the ATS Financial Hardship Order. Upon review, the full Commission overturned the FCC Wireline Competition’s Bureau’s decision, granted ATS’s waiver petition, and directed USAC to process ATS’s second revised 2012 FCC Form 499-A as if timely filed. In so doing, the Commission enumerated a number of conditions that it found sufficiently compelling to demonstrate good cause for granting a waiver of the one-year downward revision deadline. Specifically, the Commission noted that:

ATS was able to demonstrate that it had to treat the additional federal universal service assessments as material and necessitating shareholder disclosure under SEC standards;

ATS was able to provide information demonstrating the estimated per-share earnings impact of its error;

ATS’s error involved non-assessable revenue that would not have resulted in any additional federal universal service contributions had ATS filed its second revised form correctly and, therefore, caused minimal harm to the federal universal service fund;

ATS was not a filer that failed to submit its FCC Form 499-A at all, nor was it a filer that alleged it misunderstood the filing procedures, or was negligent in filing its FCC Form 499-A. Rather, ATS timely submitted its initial 2012 FCC Form 499-A and first revision based on the best information available at the time;

The time commitment involved with ATS developing the ability to more precisely identify its foreign-to-foreign revenues and improve its reporting practices resulted in ATS filing its first revised FCC Form 499-A only a few days before the FCC Form 499-A one-year downward revision deadline; and

ATS’s inadvertent clerical mistake was made on a timely filed FCC Form 499-A revision and was the result of reporting otherwise non-assessable revenue on an assessable line of the form.

While the Commission limited its holding in the ATS Financial Hardship Order to ATS’s particular circumstances, a filer who finds itself in a similar predicament should consider filing a request for waiver with the FCC. Moreover, even where a filer does not meet the circumstances set forth in the order, if it notices an error in its FCC Form 499-A reporting after the one-year downward revision deadline that would result in reduced contributions, a conversation with USAC and review of FCC precedent may be in order. For filers who face a contribution obligation as a result of an FCC Form 499-A error that amounts to a significant portion of their annual revenue or multiple times their actual obligations, USAC, with the oversight of the FCC, has put in place an administrative procedure that may apply depending on the dollar amount of the additional federal universal service contributions at issue. Moreover, precedent demonstrates that the FCC has granted waivers of the one-year downward revision deadline to at least some filers who have made ministerial or clerical errors that have resulted in a significant increase in federal universal service contributions.

Disclaimer

This blog post is a publication of Bradley Hagen & Gullikson, LLC. The purpose of this blog post is to inform our clients, colleagues, and friends of recent federal universal service legal developments. This blog post is not intended to be, nor should it be used as, a substitute for specific legal advice as Bradley Hagen & Gullikson, LLC only provides legal counsel to its clients, and only in response to specific factual inquiries regarding particular situations.

According to Black’s Law Dictionary, a Trust is “A legal entity created by a grantor for the benefit of designated beneficiaries under the laws of the state and the valid trust instrument.” What that means is: think of a trust as a basket that you own. You are the ‘grantor’. The basket holds assets. The basket is the ‘legal entity.’ You use the assets for your own benefit. You are the ‘beneficiary’, and when you die, your assets go to your children; they become the beneficiaries.
So, a Trust has 3 players:

the Grantor—the person who owns the assets put into the trust

the Trustee—the person who manages the assets for the benefit of the beneficiaries

the Beneficiaries—the person(s) who benefit from the assets—either by receiving the income of the trust, or by receiving the assets from the trust.

If I create a trust today, I may put my house, my bank accounts and my investments into my trust. The trust actually owns my assets now, not me directly. I can still do anything I want with my assets—reinvest, sell, or even give them away, but when I do that, I am acting as the ‘trustee’—the person who manages the trust. I am also the beneficiary of my trust—I benefit from the assets of the trust.
Say that tomorrow I suffer a massive stroke, and am unable to manage my finances. I still have my trust, but I cannot be the trustee. That job will fall to my ‘successor trustee.’ That trustee has a job to manage the assets and look after my needs, because while I am no longer the trustee, I am still the beneficiary.
If I succumb to the effects of my stroke and die, I am no longer the beneficiary of my trust—the new beneficiaries will be the people I have named when I created my trust—much like a Will says who will receive probate assets. At this point, the trust will probably terminate.
Trusts may be useful for some people because they allow (if properly created and managed) the owner to avoid probate on death. This is especially useful if real property is owned in more than one state. Trusts also maintain privacy for the family of the deceased person. Before you set up a trust, be sure to talk to an attorney who is working for your best interests. Trusts do great things, but they are not always the best answer.

I have just read the associated press article www.startribune.com/entertainment/…/290621711.html. Titled: “Robin Williams’ Family Is Feuding Over His Will”. As one reads further into the story, it turns out that the family is not in fact at odds over his Will, but rather are seeking clarification regarding Mr. Williams’s Trust. Be that as it may, what this short article points out is the need for clarity in an estate plan.

Personal property, the ‘things’ one owns, are generally left all to the spouse, and if the spouse is not living, then equally to the children. Most estate plans assume well behaved children, and leave it to the children to determine who gets what. If children have trouble deciding how to split items, such books as Who Gets Grandma’s Yellow Pie Plate http://www.extension.umn.edu/family/personal-finance/who-gets-grandmas-yellow-pie-plate/ can be of great help. It is seldom necessary or financially worthwhile to involve lawyers. Seldom are items of a personal nature left to children before the spouse, and if they are, those items are usually listed specifically, with the recipient clearly indicated .

This plan of leaving items to one’s spouse then to children is contingent on the idea that everyone is of the same mind. As soon as additional spouses (it appears from the article that Mrs. Williams was married to Robin Williams for less than 3 years), step children, or sibling animosity enters the picture, general statements in the Trust Agreement are not helpful, especially when the potential worth of such items is large.

When planning one’s own estate distribution, it is important to keep in mind the value, both market value and sentimental value, that your heirs may place on certain items, and examine realistically whether your heirs will be able to agree when the terms are vague. This may sound as if an inventory and specific assignments are the way to go, but if your family is harmonious, not just in your mind, but in the real world, there is no need to pay for such specificity, nor to keep your inventory current.

In short, be aware that distribution of personal items can cause tension in a family, and if at your death, you have a family where all children do not have only your spouse and you as parents, think about how specific you need to be.

I want to take my first opportunity to contribute to the Bradley & Guzzetta website to introduce myself and thank Mike Bradley and Steve Guzzetta for inviting me to join their firm. I have been practicing law in Minnesota since 1997. I am focusing my current efforts on assisting veterans after over 15 years as a general practitioner, military lawyer and government employee. I also have a strong interest in public service as I strongly believe it to be critical to the health and vitality of our American experiment in self-government. My nearly 25 years in the National Guard with three overseas deployments since 2003 have also given me a strong appreciation for and desire to serve my fellow veterans. It is for them that I have returned to the private practice of law. Although I am focusing on veterans, I bring a wealth of experience in law, government, public policy and military affairs to the firm and am available for a wide range of matters.

I’ve known Mike since we served together in the National Guard as judge advocates (military lawyers) in the late 1990s. I am a born and raised Minnesotan and my family has deep roots in Minnesota and the Upper Midwest. I was born at the old St. Mary’s Hospital (now University of Minnesota Riverside) and graduated from Chaska High School in 1986. While studying political science at the University of Minnesota-Duluth I developed my interest in government, politics and public policy. This led to my interning in then-U.S. Senator Dave Durenberger’s Washington, D.C. office and eventually a full-time gig on his staff after I graduated.

I returned to Minnesota to attend law school at William Mitchell at night while I worked for the State of Minnesota during the day. After graduating my wife and I decided that we wanted to start a family in a small town and I accepted my first attorney position with a small firm in Waseca, Minnesota. I commenced to start a family and a general practice focusing on family, criminal and municipal law. It was a great place to learn the ropes of the law. My interest in community service also led to my seeking public office and election as Mayor of Waseca in 2000.

In the post-9/11 era, my service with the Minnesota National Guard led to three overseas deployments starting in 2003. As a young captain and judge advocate with the 34th Infantry Division, we deployed to Bosnia-Herzogovina in support of the Dayton Peace Accords that ended the war following the break up of Yugoslavia. This was the largest deployment of the Minnesota National Guard and the first for the 34th Infantry Division headquarters since the end of World War II. Little did we know that this was just the first of many deployments for the Minnesota National Guard and its Red Bulls. I then served as the Brigade Judge Advocate (senior lawyer) for the 34th’s First Brigade Combat Team in southern Iraq in 2005-06. Caught in the 2007 surge, the First Brigade’s 22-month deployment turned out to be the longest for any U.S. Army unit in Operation Iraqi Freedom. I then deployed for my third time as the Deputy Staff Judge Advocate for the 34th Infantry Division headquarters as it deployed for the second time since World War II in 2009. The 34th provided command and control for 16,000 troops in the 9 provinces of southern Iraq. I currently hold the rank of Lieutenant Colonel. Between deployments I returned to state service as an Assistant to the Commissioner at the Minnesota Department of Commerce. I recently completed a three year set of active duty orders with the National Guard in a mission supporting civil authorities in domestic emergencies and natural disasters.

My wife and I continue to live in Waseca, Minnesota with our three children. I am a member of the American Legion and VFW and coach youth baseball. My wife has been a financial advisor with Edward Jones since 1999. Our two boys are involved in baseball and football and our special needs daughter brings much joy and challenge to our lives. We like hunting, fishing, boat and camping. I guess you could say we are natural Minnesotans. My full professional bio can be found on the firm website at http://bradleyguzzetta.com/TomHagenBio.html, and I can be reached atthagen@bradleyguzzetta.com.